Considering ERP Software? Here are some secrets to evaluating ERP Software properly.
Just as important as choosing the right software system, is choosing a knowledgeable partner to guide you through the installation and configuration of your new software. Learn how to do that here.
Near or Far?
Should you choose a company based on its location? There is no universal right answer to this question. Some are adamant that purchasing from a local company is best, while others are equally convinced that location should be irrelevant. Ultimately, itï¿½s up to your company to determine how your needs will be best fulfilled. Before you make a decision, consider the points below.
Benefits of purchasing from a local supplier
Reduced travel time and cost for onsite visits, setup, and training.
It stands to reason that if the firm you purchase your software from is local youï¿½ll save costs with onsite work since the time needed to get to your location is significantly lower.
Local purchases support local industry.
Local businesses, employment, and local taxes benefit when a purchase is made from a local source rather than a supplier who is not local.
Ease of reference checking and improved confidence in the reference
Contacting a local reference for the supplier may be easier than contacting a reference who is out of state. In addition, you may more familiar with a local firm and thus have a higher confidence level in the references comments.
Stronger legal recourse
No one makes a purchase assuming the worst. But if the worst happens and a law suit ensues, the legal ramifications are less when dealing with a local firm than a firm who is out of state.
Potential for personal relationships being established
A local firm may have a larger vested interest in pleasing a local client. Working face to face with a client tends to nurture a personal relationship which can provide dividends in getting extra projects done more quickly or with price concessions.
Possible price concessions
A significant portion of your purchase price includes installation, setup and training services. In order to gain your business, a local supplier may be more aggressive in their pricing for these services.
Benefits of purchasing from a company regardless of location
Greater number of software options available
Reviewing software from a wider area may result in more options than might be found in just your local market. This is particularly true in smaller metro areas.
Potential for improved service offerings
Some software suppliers focus on a limited number of industries or applications. That focus may translate to deeper knowledge of your needs and how to best solve those needs.
Remote support often is available (applies to any firm regardless of location)
Often firms provide online support. This allows many issues to be solved remotely without the need for someone to physically visit your firm.
Industry specific software more likely to be available
Reviewing options from non local suppliers may increase the chance that the software you purchase is designed for your specific industry.
What does “concurrent users” actually mean?
The term “concurrent users” refers to the number of people who will be using the software system at the same time. The key point being at the same time. Don’t confuse concurrent users with the total number of people who need to use the system.
How does the number of concurrent users affect your system?
Generally speaking, the software price increases as you add more concurrent users. The more users you need the more complex and expensive the software becomes. Also, more employees using the system probably means that your company has more transactions such as checks, invoices, purchase orders and a larger number of vendors, customers, inventory items, etc. The combination of more concurrent users plus a larger number of transactions and activity demands that the software’s underlying database be robust enough to provide an instant response when used.
A database is the foundation of your accounting system. Many different databases exist each with different performance capabilities. The larger your company data and the more concurrent users needed means the software you choose will need to have a robust database foundation in order to perform up to your expectations. Typically a strong database foundation is more costly for the software developer to use which of course causes the accounting software cost to rise.
With this in mind, you must consider the total number of people who will need access to the software at the same time before you buy a solution. Make sure to verify with your vendor that the software you’re considering can efficiently handle your user needs.
Buy or Rent?
Which is a better fit for your company?
Deciding on what type of software system to invest in depends greatly on your comfort level with technical control, your need for customization and your purchasing power. For example, when you purchase your software system there is a larger price tag upfront, but in the end, you will actually own the software. Buying your accounting software allows for the ability to customize it if needed and puts you in charge of security controls. It also means you have additional maintenance responsibilities.
With hosted software, you rent your accounting system from an Application Service Provider (ASP) instead of buying it. Although your initial price is low you will have monthly rental fees which provides access to the software, regular updates, and technical support. This reduces the need for employees to install or maintain the software. However, since you don’t own the software, it’s likely you’ll not be able to customize it to meet your specific needs. You also do not have as much control with any security issues you may encounter. Finally, your accounting data does not reside on your computers but resides on your ASP service providers computers. Before making your decision either way, be sure to consider all of the following points.
Benefits of a buying the software
Wider choice of software options available
The option to purchase software has been available for a longer time then the ASP option. Therefore there are are thousands of software options from which to choose. Frequently you will find a software solution designed specifically for your industry.
One-time purchase investment
You invest in one payment for the software at the time of purchase (note: various financing options exist to ease the payment for the software). Although there will be ongoing upgrade and support costs, you won’t need to make additional payments to use the software…you own it.
Can be customized to meet your specific needs
When you own the software you can tailor the configuration, change pre-set defaults, and decide when to install upgrades. The software will only be used by your company, and it’s common that some standard features will need to be customized to best compliment your business processes.
Prevent security and accessibility failures
Since you have control over your system you control the measures to prevent unauthorized users from entering your system. You also determine the security of your data since it doesn’t ever need to travel outside of your company’s secure network.
Find multiple local IT companies that represent the software
Simply because of the commonality of purchased software, you will likely find local companies that offer and support a variety of software solutions. This can be an advantage with training new employees on the software use.
Benefits of renting or a hosted software solution
Pay a low monthly service fee to access the software
For companies that do not have as much capital available, paying a low monthly service fee per user lessens the financial strain of a software investment. You can also add modules and users as your business grows, which eliminates the possibility of outgrowing your system.
Rental fees include support, upgrades, security and data back-up systems
All of the upkeep responsibilities are in the hands of the ASP, and they are all included in the monthly fee. You will always have access to the newest version of the software, and your ASP typically provides daily data back-ups of your data.
Decrease the need to hire and train employees to maintain the software
Since tech support responsibilities will be done by your ASP, the staff time needed to maintain the system is not needed
Reduced time needed to install your software
Since the ASP provider already has the software loaded on their server, you’ll not need to install it on yours. That means less time spent getting your company started using the system.
Access your data from anywhere with an Internet connection
If you have access to the Internet, you have access to your accounting system. All you need to do is find an Internet connection and log into your system.
Will you need help getting started with your system?
When you purchase an accounting system, keep in mind that the software cost is only part of your investment. Besides purchasing the software you need to budget time and money for installation, configuration and training. In addition, you may also need to convert your existing accounting system data to the new system.
The amount of time needed to get your system up and running can add up. Some firms try and tackle this on their own. Although this is possible remember that your other responsibilities still have to be done while you try to learn, install, configure your new system. You’ll find that the services provided by your software seller will lighten your load and get you off to a great start with your new system. The costs charged by your software seller varies by locality and software purchased, typically this can range from 50% to 200% of the software price.
It is critical that your staff understands your new system. Initial and periodic orientations will help them use the system efficiently and reduce their apprehension about the changes being brought on. A common trait of dissatisfaction with software can be traced to lack of training. All of your staff will need training on the basic functionality, and management will need to understand how to effectively interpret your new reporting capabilities.
Additionally, the software needs to be installed and configured specifically to work with your office’s hardware like fax machines, printers, and servers. When installing the software it also is very common to customize many standard features to better work with your day-to-day business tasks. To determine your company’s implementation needs, consider the lists below.
Format common documents
To maintain accuracy and consistency within your print communications it is important to adjust standard document components to compliment your business functions. You may want to format many or all of the following documents.
- Purchase Orders
- Invoice Statements
- Sales Orders
- Payroll Checks
- Pick Lists
- Pack Lists
- Vendor Checks
- Work Orders
- Chart of Accounts
- Purchase Contracts
- Parts/Item Lists
- Mailing Labels
- Bills of Lading
- Bar Code Labels
- Shipping Schedules
- Purchase Requisitions
Setup software defaults
To keep your business running smoothly, it is likely that you’ll need to change or create certain defaults within the software system to accommodate your everyday tasks. You may want to customize many or all of the following default settings.
- Customer terms
- Vendor terms
- Payroll tax tables
- Freight carrier terms
- FOB terms
- Pricing tables
- General Ledger chart of accounts
- Job Cost defaults
- Accounts Payable payment terms
- Accounts Payable expense accounts
- Shipping addresses
- Inventory pricing tables
- Invoice format
- Billing rates
It is vital that the reports are set-up correctly to give you the insight you need to make the decision process more efficient. Although many reports are predesigned with each application you may want to customize many or all of the following reports.
- Budget Reports
- Balance Sheet
- Financial Statement
- Statement of Cash Flows
- Accounts Receivable Ageing Reports
- Payroll Tax Reports
- Cash Receipts Journal
- Cash Disbursements Journal
- Sales Journal
- Purchase Journal
- Time & Expense Reports
- Vendor List
- 1099 Reports
- Error Reports
- Employee Information Reports
- Commission Reports
Train your employees
Software isn’t a good investment if it’s not used to its fullest extent, so it’s vital that your employees understand the capabilities of your new system. You’ll want to plan on training your entire existing staff on the general functionality of the software, the accounting staff on the use of specific applications, and management on report interpretation. Additionally, the System Administrator will need to be shown how to perform maintenance tasks such as upgrades, updates, logs, and back-ups.
Install the system
To get the software functioning, you’ll need to install each application to work together in the network and with your office’s corresponding hardware. Once this is complete, it is necessary to enter your historical customer, product, and employee data from your old system into the new. How you go about doing this depends on the systems you’re taking data from and entering it into, but be aware this may require manual re-entry of all your data.
Developers and Resellers
Know your Developer and Reseller
Accounting software is sold either directly by the developer, or through a Value Added Reseller (VAR) network certified to sell the software. Either way, it’s important that you partner with companies that can meet your needs and you can rely on in the future.
What should you know about the developer?
Due to mergers, acquisitions, and simply the competitiveness of the software industry, you’ll want to try to determine if the developer has financial stability. This is quite important to avoid getting stuck with software that’s outdated and no longer supported.
Additionally, you’ll want to ask about what industries the developer caters the software towards. Some companies make products designed to work with any business, regardless of industry, while others focus on more industry-specific software needs. If you do have industry-specific needs, it’s a good I idea to find a product that was developed with those needs in mind.
What should you know about the company selling the software?
Whomever is selling you the software should be forthcoming with information about both their company and the company that develops the softwareï¿½assuming you’re working with a reseller. You’ll want to consider each company’s track record, market share, and experience level to ensure your software implementation is a success.
Asking the right questions can help to avoid a lot of head aches down the road. For your own reference, get a list of five clients that recently implemented the product you are considering. Then, take the time to call each to discuss their experiences before and after the sale to make sure you buy software from a company that has a reputable history of customer satisfaction.
Remember, the company you choose to implement your software dictates the success or failure of your software investment, but it’s your responsibility to make sure that all of your data conversion, customization, and configuration needs can be met. That is why it’s vital that you ask about the specific services that each company offers, and try to determine how proficient they are at the specific tasks you need completed.
If you don’t do your homework, you could end up with a company that’s not knowledgeable, and simply can’t solve your needs. This, in the end, will only lead to your wasted time and money.
Important questions to ask your prospective suppliers
It’s important that you choose to work with someone who seems to be genuinely interested in what you say and cares about trying to correctly understand your needs, wants, and issues with your current system. The success or failure of your implementation experience will depend greatly on whether of not you’re comfortable with the salesperson and his or her supporting staff. Use the following questions to strengthen your relationship with your salesperson.
With whom will I be working to implement the software?
You would probably not only be dealing with the salesperson, but also a team of technical support people to implement your solution. Make sure to meet the entire team before you make a decision.
How long have you worked with this product?
It’s likely you’ll have a more successful implementation if the salesperson has experience working with the product for a while. Working with a less experienced salesperson can lengthen the time it takes to implement the software, since the salesperson is in the process of learning about the software as well as how your business works.
What are your product certifications?
This can be an indicator of the salesperson’s knowledge level, in that it shows that the salesperson went through some type of training on the product. Working with a certified professional helps ensure that your software will be implemented correctly.
What experience do you have working with companies in my industry?
Your industry has specific needs, so if the salesperson has worked with companies similar to yours it is more likely that those needs will be clearly understood. Not to mention, this experience with similar needs and issues can cut down on the amount of time spent trouble-shooting and implementing your software.
Which of my specific needs will be met with this software?
This is a way to find out if the salesperson truly understands your specific needs, or if you’re working with someone who just wants to make a sale. Addressing each area of concern and identifying the functions of the software that will solve each issue will only strengthen your confidence in your decision.
Are you paying too much for too little?
No one wants to overpay for their software, but you need to make sure you’re spending enough to accommodate the majority of your needs. You’ll never get away with a low price and high functionality software product—it just doesn’t happen. Often times, companies that decide to purchase cheaper software end up looking for a new system after they get fed-up with the lack of functionality.
Accounting software is a continuous investment, not a one-time purchase. You’ll need to consider ongoing costs such as maintenance, support, updates, etc. in addition to the initial purchase of your software. These costs are necessary in order to keep your software updated and functioning properly.
What can you expect during price negotiations?
When receiving your first quotes, it’s important to remember the total investment may be presented as a bundle, opposed to line-item pricing. There may be a fudge-factor built into the proposal price that can be adjusted in final negotiations. Also be aware that at the end-of-month, quarter or year companies may have a greater desire to do a deal in order to meet sales quotas or goals.
However, some firms present their best (lowest) price first and you may not be able to reduce the investment even if you request it. During price negotiations, your salesperson should be professional and leave you feeling comfortable with the outcome.
Important questions you should ask about the price
Make sure to get a detailed break-down of line-item pricing between the companies you’re considering to make sure you’re not paying more than you should when selecting software. If implementation dollars or hours vary widely among proposals, request and expect an explanation. To get you started we’ve listed some basic questions below.
Is support included in the price, or is it something separate I have to purchase?
This depends on the type of solution in which you invest. With a hosted solution, you never purchase the software but you pay a monthly service fee. With a purchased solution, the contract may include some support costs upfront, but you’ll probably end-up paying a yearly maintenance fee separate from the initial cost of the software.
Is implementation included, or is it a separate price?
This depends on from whom you purchase the solution. Often times if you’re presented with a quote, the vendor will include the cost of implementation with the price of the software.
How much does customization cost?
This will ary among the software packages you evaluate. Some solutions will require more “tweaking” than others. It’s important to find the right balance between standard features and customizations needed, since the less you have to customize, the less you have to pay.
What are my monthly licensing fees?
If you are considering a cloud deployment, you will likely pay monthly licensing fees – but this should be all you have to pay (no hosting fees, server charges, etc.)
What does it cost to acquire a server?
If you are not considering a cloud deployment, you will need a server. If you don’t have an updated server, chances are you’ll need to invest in one in order to run your new software.
How much extra is it to add users?
Knowing this ahead of time can help you to determine if you should invest in the extra licenses now or wait until they are actually needed.
What is the cost of data conversion?
Again, this will vary from company to company, but keep in mind, this is likely to cost you quite a bit. Transferring data from your old system to the new one could involve investing in a custom program or the salesperson may actually have to re-enter all of your data into the new system.
What is the cost of training?
You should invest enough of your budget in training in order to ensure your employees are using the system correctly. In the long run, it is a worthwhile investment, since it will avoid many of the errors untrained employees would likely make.
How well does the software meet your needs?
While no standard software package will meet all of your needs—and still be affordable—you should expect that your main needs will be addressed. Often times a software package can be tweaked to meet your minor needs, but the level of customization needed will differ for each software package you consider.
Another thing to take into account is the extent in which the software can upload your historical data. For some software packages, it may not be as easy to transfer data from one system to another.
What do the users of the software think?
It’s important that people that need to use this software on a day-to-day basis feel that their input is valued. It’s a good idea to circulate a request among the involved employees for their ideas of what they think should be included in your new software solution. In the end, this will encourage everyone to buy-in and support your decision, even if not all of their identified needs are met.
How do all of these features relate to my business?
Don’t be afraid to ask, “What does that mean for me?” When your salesperson presents the software or shows you a demo, make sure it’s clear how the product’s features will work with your specific company’s situation. You should fully understand how the software will solve your frustrations with your current accounting system, and what benefits your business will gain in the long-run.
Important questions to ask about the software
It’s important that you fully understand what it will take to get the software up-and-running in your office. Sometimes additional hardware, customization, or services are needed. The more information you have up-front, the more comfortable you’ll be with your purchase.
What level of customization does the system need to accommodate my industry-specific needs?
No standardized package will meet all of your software needs, so some customization will likely be needed. The extent of which is up to the functionality of the product. Your salesperson should present your customization costs upfront, so you don’t encounter any surprises down the road.
Can I have remote access to the software system?
If you work away from the office and you need to instantly retrieve your customer information, remote access may be something you can’t live without. Not all software packages contain this feature, so it’s important to find out whether or not it is an available function of the system before you make your purchase.
Is there a limit to the total number of vendors, customers, and transactions I can track?
Some software solutions hit a maximum capacity of information at a much lower quantity than others, which can make the system run slowly or not at all. You should be sure that the system you buy can handle your volumes and expected growth.
Can user access be limited to certain parts of the software?
When you have multiple users of a system, the need to limit the access of your users to certain parts of the program increases. You don’t want everyone to have the ability to make changes to your accounts, payroll, etc.
Will the program run on my current operating system, or will it require an upgrade?
This can be one of those hidden costs that add to the total price tag. Many times new, updated versions of the software will run primarily on the latest platform. If your operating system is outdated, you can pretty much plan on upgrading.
When is the best time to implement your new system?
Implementing your software as soon as you’ve made the purchase decision may not necessarily be the best time. To get your software up-and-running efficiently, it’s important not to implement during your busy season or the vacations of employees who will be using the system.
By installing your system during an opportune time, your staff will be able to learn the software at a comfortable pace that won’t test their patience. Each user’s learning curve will vary, but it is vital that all employees that are to use the product are given enough training.
This way when crunch times occur, your company will be prepared to utilize your new software to its fullest extent. If you rush through the installation and training process your entire software investment can be wasted. So, be sure to work with your salesperson to determine the appropriate length of time for implementation, training and configuration to get it done properly.
Important questions you should ask about implementation timing
You want to make sure you implement your software during a time that is both convenient for your employees and for your business in general. Implementing during your busy season will complicate the installation process far more than if you choose to get your software up-and-running when you have more downtime. Consider the following questions to make sure you and your salesperson are on the same page in regard to your installation timeframe.
How much time do you estimate that our company would need to set aside for entire installation and training process?
From past experiences, your salesperson should be able to give you a rough estimate. However, it’s a good idea to set aside a small cushion of time to work out kinks that may arise.
Will the software be installed and up-and-running before my busy season begins?
Your software investment shouldn’t hurt your business, so it’s vital that your busy season isn’t affected. Make sure your salesperson is working towards a clear deadline.
What obstacles do you foresee that could make us fall behind the estimated schedule?
Again, past experiences give your salesperson the benefit of knowing common problems that you may never of thought of. If you ask about these up-front, it is possible that you will be able to work towards preventing some of these problems and save money.
Evaluating ERP software can seem like a daunting task, especially if you have not done it before. With this guide to the secrets of evaluating ERP software, you’ll make the right choice for your business, and you’ll save time and money doing it.